Cairn to begin Rajasthan production from Aug 29

Cairn India Ltd will start producing crude from its largest field in Rajasthan on August 29, an area that will help increase the country’s oil output by 20%.

The explorer, which currently produces around 65,000 barrels of oil from its existing blocks,  will hit a production of 30,000 barrels per day (bpd) from Rajasthan in a few weeks, CEO and managing director Rahul Dhir said. It expects to hit a rate of around 1,25,000 bpd next year, and has already tied up offtake of around 60,000 bpd with government-owned oil refiners.

Output from Cairn’s field starts five months after Reliance Industries Ltd began producing natural gas from an area off the nation’s east coast. The fields may help India, which imports over 75% of its energy requirements, attract bidders for 70 oil and gas exploration areas being auctioned this year.

The company said its 15-year-old Ravva field has already contributed $4 billion (Rs 19,000 crore) to government revenues in the form of royalties and revenue share and the Rajasthan block is likely to contribute around Rs 36,000 crore to the public exchequer over the life of the block.

Cairn also said the development cost of the Rajasthan block is expected to be around $3.3 billion, or around $3.5 per barrel, 30% lower than the development cost of Reliance Industries’ KG D6 block. However, due to the non-availability of the pipeline, the company will have to incur an extra trucking and transportation cost of around $10-12 per barrel, including the cost for shipping the oil from Gujarat to Mangalore.

The 700 km heated pipeline from Rajasthan to the Gujarat coast, the longest of its kind in the world, is expected to be ready by the end of the year and will reduce the overall transportation cost to $1.5, the company added. “Our commitment was to start production on time in the national interest, even if it costs us more. That is what we are doing,” Dhir said.

The explorer plans to complete building a pipeline to transport the crude from the field to the west coast in Gujarat by the year end.

The target for completing the pipeline looks to be “increasingly challenging,” Cairn India chairman Bill Gammell said on Tuesday.

(With inputs from Sreejiraj Eluvangal of DNA Money)